India’s stock market has expanded 17 times since 1995. Despite the stock market’s growth, only three to five percent of the country participates in the market directly or through mutual funds. While India has a high household saving rate, only about 10 percent of savings are invested, limiting the amount of money that is converted into financial assets.

USAID Financial Institutions Reform and Expansion – Regulatory (FIRE-R) helped make the Securities Exchange Board of India (SEBI) the country’s strongest regulator of financial markets. Poor enforcement has hampered SEBI’s effectiveness, contributing to a low investor confidence and limiting the number of Indians participating in the stock market. Now addressing the regulatory board’s enforcement capacity, FIRE-R works with SEBI to:

• Design and implement a comprehensive surveillance system for the cash and derivatives markets;
• Develop a regulatory framework for testing, licensing and certifying of stock brokers, financial investors and other market intermediaries;
• Provide training on enforcement issues conducted by the U.S. Securities Exchange Commission
• Increase disclosure of information and simplify documentation; and
• Helps integrate SEBI rulings and penalties into the court system.

FIRE-R also helps India’s newly opened insurance sector improve its regulation and stability. These improvements help to free up long-term finance and allow it to be concentrated in areas such as infrastructure. Through international technical assistance and access to U.S. insurance industry ‘best practices,’ FIRE-R:

• Helps build the Insurance Regulatory Development Authority of India’s institutional and surveillance capacity;
• Encourages the growth of the insurance sector;
• Conducts seminars and trainings and formulates committees to develop a policy and regulatory environment specifically focused on health insurance and the health care industry;
• Develops efficient intermediary systems and competent professional bodies;
• Creates database infrastructure; and
• Expands insurance services to reach and address the unique needs of poorer populations.